Principal HSA Basics
How an HSA works
Contributions to an HSA can be made by participants, their employers or others (gifting penalties may apply). Money in the HSA can be invested or applied to health insurance deductibles or qualified medical expenses as outlined in Section 213(d) of the Internal Revenue Code.
HSAs feature triple tax advantages, including:
- Contributions are not subject to federal income tax.
- Interest and investment returns accumulate on a tax-deferred basis.
- Withdrawals for qualified medical expenses are tax-free.
Money in the HSA belongs to the participant. There is no "use it or lose it" component. Unused balances in the HSA roll over to future years and have no limit on growth, much like a 401(k).
Types of eligible companies
Almost any company is eligible. No employer size restrictions or employee income restrictions apply.
Sole proprietors, partners or shareholders of Subchapter S corporations can contribute to an HSA.
Types of eligible individuals
Individuals must meet a few simple requirements to participate in an HSA:
- Individuals must be covered under a qualifying high deductible health plan (HDHP).
- Individuals cannot be covered under any medical insurance that is not a qualifying HDHP, and cannot be covered as a dependent under someone else's non-qualifying insurance. Other types of non-medical coverage are permitted with an HSA.
- Upon enrolling in Medicare, individuals can no longer make HSA contributions. They can, however use the money accumulated in an existing HSA.
To help your employees determine eligibility, use our HSA Calculator.
Savings and investment options
Within a Principal HSA, participants choose from three savings and investment categories.
- Interest-bearing checking account
- Certificates of deposit
- Mutual fund options
These options are available from us. View HSA investment options and rates.
Administration Platform - Direct Connect
Direct Connect, our Web-based administrative system for HSAs, simplifies account management with online services. It features:
- A single login from principal.com
- Electronic funds transfer (EFT) for contributions
- Online participant information management
- HSA news, alerts and reports
- State-of-the art encryption software to keep your information safe
Automated Contribution Limit Checks
HSAs have an annual maximum contribution limit set by the IRS. Excess contributions are subject to additional taxes.
With a Principal HSA, excess contributions are automatically flagged for resolution. You will receive notice through our Direct Connect system at the time you submit contributions if a participant’s HSA exceeds the limit. This system for early checks and balances can help your participants avoid penalties.
For more information
If you're interested in an HSA, please contact your local broker or call our HSA Hotline today.
